Building Beyond Bricks: A Company Analysis of LEGO

Authored by: Nadine Mir, Paulo Pilar, Ashley Simone Tan

Edited by: Elijah Soriano, Ethan So, Justin Choi, and Jared Go

The Lego Story

The LEGO story begins in the early 1930s when Danish carpenter Ole Kirk Christiansen struggled to keep his wood workshop afloat due to the Great Depression. By 1932, Christiansen pivoted from making furniture and household goods to crafting wooden toys such as pull-along animals, cars, and yo-yos. Despite the economic downturn, he believed parents would still purchase quality toys for their children. With his passion for woodcrafting and belief in the necessity of play for a child’s growth and development, Christiansen’s toys gained popularity, becoming known for their impeccable craftsmanship and simple yet engaging designs.

Two years later, he decided to name his company as LEGO, a combination of the Danish words “leg godt,” meaning “play well” (LEGO, 2022). Beyond his knowledge, LEGO also translates to “I assemble” in Latin—an accidental foreshadowing of the company’s future (LEGO, n.d.-a).

Figure 1. LEGO Wooden Toy (Source: LEGO)

LEGO was moderately successful with their wooden toys, but a turning point manifested in the late 1940s when plastic emerged as a revolutionary material in manufacturing. Recognizing its potential, Christiansen began producing small plastic bricks called “Automatic Binding Bricks” (LEGO, n.d.-b). These early bricks featured simple interlocking designs, but lacked stability and were immobile. It was Ole Kirk’s son, Godtfred Kirk Christiansen, who designed LEGO’s stud-and-tube coupling system. Bricks were still dismantlable, but would no longer fall apart when moved around (LEGO, n.d.-d). Such improvement unlocked endless doors for LEGO and turned it into a system of limitless possibilities.

Figure 2. LEGO Automatic Binding Bricks (Source: LEGO)

What began with humble wooden toys has evolved into an empire, inspiring generations of builders to actualize the worlds pictured by their imaginations. LEGO grew into the brand it is today brick by brick. Although gone, Ole Kirk Christiansen is immortalized in each set that embodies his belief that quality, creativity, and play could change the world.

The System in Play

The business model of LEGO is centered around three key areas — versatile design, brand partnerships, and global distribution. First, design and development. With an approach that focuses on innovation and versatility, LEGO constructs its bricks to be simple and adaptable to cater to its users imagination and creative expression (LEGO, n.d.-e). The LEGO System entails that a brick from any time can build anything (LEGO, n.d.-e). Second, licensing and partnerships. Since the late 90s, LEGO has collaborated with brands like Star Wars and Harry Potter to create themed sets that attract its large fan bases (Amarsy, 2015). Third, distribution and sales. Using a multichannel distribution strategy, LEGO sells its products through brick-and-mortar stores, online platforms, and commercial partners such as Ban Kee Trading, Inc. in the case of the Philippines (Pereira, 2024; The Manila Times, 2024). This ensures a global reach that enables customers worldwide to easily discover and purchase LEGOs.

LEGO also continues to captivate builders of all ages. Looking at the bricks alone, it has LEGO Duplo for young children and LEGO Technic for older kids eager for more advanced play. LEGO also caters to adults, as they have recognized they are also builders themselves (Pereira, 2024). This is much to the advantage of LEGO as the so-called “Kidult” toy market generates significant profits. Considering this extensive audience, LEGO has a substantial 7.9% share of the global toy market (Schoenbauer, 2024).

However, beyond its bricks, LEGO branched out into other ventures that allowed it to engage with an even wider audience. By launching programs such as LEGO Ideas – an online platform where LEGO creations can be proposed and upvoted, and LEGO Education – an initiative where LEGO products are incorporated into schooling, LEGO introduced new opportunities for learning with play (Pereira, 2024; LEGO Education, n.d.). Aside from the themed brick sets, the franchise deals also brought LEGO worlds to life through mobile apps and video games like LEGO Star Wars: The Skywalker Saga and LEGO Super Mario (LEGO, n.d.-g). Interestingly, it has also produced box office hits like the “The LEGO Movie” which has grossed around $470 million worldwide, and television series like the “LEGO DREAMZzz” that have appealed to both kids and adults alike (IMDB, n.d.; LEGO, n.d.-h). Taking it a step further, they have also created attractions like the Legoland Discovery Centers, LEGO House, and Legoland Parks for newcomers and longtime fans to experience the imaginative world of LEGO beyond their homes (LEGO, n.d.-i).

Figure 3. Legoland Japan

All these varied offerings infused with ingenuity and charm have seamlessly come together to make LEGO a beloved brand, making it a cultural phenomenon that is passed down through generations and constantly rediscovered and reimagined.

The Battle for Bricks

However, like many companies, LEGO faces competition. In particular, three major competitors stand out for LEGO: Bandai Namco, Hasbro, and Mattel. The Japanese toy company Bandai Namco is a rival as it offers a LEGO-like brick called Nano Blocks (Heatley, 2024). While Nano Blocks provides a more affordable and lightweight alternative option, it falls short on its playability and durability when compared to LEGO (Heatley, 2024). On the other hand, although not a direct competitor of LEGO in terms of product, Hasbro has a broad range of popular toys like Transformers, Play-Doh, and Monopoly that make it a crowd favorite alongside LEGO (Hasbro Shop, n.d.). Mattel is also in close competition as the largest producer of well-recognized toys such as Barbie (Mattel, n.d.; Heatley, 2024). However, LEGO continues to hold its top position, especially in the toy building market, because of its comprehensive selection of products that remain true to the iconic brick concept, strong brand recognition, and a cultural influence in the physical and digital world (EMR Claight, n.d.; Staley, 2024).

Building Blocks of Success

LEGO reported new highs for their revenue and profit, emphasizing their dominance in the toy industry in 2024. To be specific, driven by innovations in their product line, the company's revenue grew to $10.4 billion from a previously recorded 9.6 billion in 2023, marking a 13% increase from the previous year (LEGO, 2024). Moreover, despite the 1% decline that the global toy industry faced in the year, LEGO managed to significantly grow their market share by increasing consumer sales by 12% compared to 3% the previous year (LEGO, 2024).

Looking at the company’s profitability and operations, its net profit saw a 5% increase from 2023 with it increasing from $1.9 billion to $2.0 billion (LEGO, 2024). The operating profit, on the other hand, showed a 10% increase from 2023, amounting to $2.6 billion, driven by an exceptional top-line supported by scale efficiencies, increased asset utilization, and productivity (LEGO, 2024). Though due to accelerated spending on sustainable materials and strategic initiatives, their operating margin decreased from 26.0% to 25.2% compared to 2023. They continue to maintain a strong financial position, with their free cash flow increasing to $1.4 billion, marking a 47% increase. Additionally, the company has invested $1.2 billion in property, plant, and equipment as well as expanded its capacities in existing factories in Mexico, Hungary, and China. Furthermore, they have invested in new factories located in Vietnam and the US to increase production and meet the growing global demand (LEGO, 2024).

LEGO and Beyond

LEGO inspires builders of all ages to unleash their imagination. Despite the challenges it has faced over time, the company continues to evolve, embracing digital transformation, expanding into entertainment, and engaging with diverse audiences, further solidifying its leadership in the toy industry. Its unwavering commitment to quality, innovative design, and community engagement has kept it ahead of competitors. With a strong financial foundation, a focus on sustainability, and an ever-expanding product catalog, LEGO is poised to remain a beloved brand for generations to come. Ultimately, LEGO proves that it’s not just about stacking bricks—it’s about building dreams, one creation at a time.

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